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A potential Department of Labor rule regarding financial professionals' fiduciary duty could render a cost-benefit analysis from the Securities and Exchange Commission moot, according to a comment letter to the SEC from Davis & Harman, a law firm representing many brokerages and mutual funds. "Virtually all responses to the [SEC's cost-benefit] request will be rendered obsolete and incorrect by the DOL fiduciary project," Davis & Harman partner Kent Mason wrote. "The SEC and the DOL should not function separately in regulating the exact same behavior. The SEC and DOL need to act on this fiduciary project together."

Related Summaries

With the expiration of the comment period for a cost-benefit analysis, it remains up to the Securities and Exchange Commission to decide what the next step should be toward the establishment of a fiduciary standard. Options include a rules-based fiduciary standard, a principles-based standard and harmonized rules for investment advisers and broker-dealers.

The White House's fiscal 2014 budget proposal includes a 27% increase in the budget for the Securities and Exchange Commission. The SEC says it would use the extra funds to hire staff, devoting many of them to adviser exams.

The Securities and Exchange Commission delivered its study on a universal fiduciary standard for investment advice to Congress in January. The agency had planned to issue a new standard in April, May or June, but it won't make its deadline.

The Securities and Exchange Commission likely will follow the lead of the Troubled Asset Relief Program when the agency proposes rules for compensation of brokers and broker-dealer executives, experts said. TARP's rules, which were temporary, included a ban on golden parachutes for the top five executives of a financial institution. The SEC's rules could include claw-back provisions and limits on incentive pay.

The Securities and Exchange Commission is unlikely to take action on an overhaul of 12(b)-1 fees before mid-2011 because it is preoccupied with efforts related to the Dodd-Frank Act, experts said. Many insiders expect that when the SEC does propose changes to 12(b)-1 fees, they will differ significantly from existing proposals. First, the SEC must sift through comment letters about its 12(b)-1 plan. The piece of the 12(b)-1 proposal that would allow brokers to set their fees could result in a lower level of service for smaller clients, said Kevin Carroll, associate general counsel for SIFMA. Read SIFMA's news release.